For much of Wall Street it has been a week where the “risk-off” trade has been dusted off. And it could get worse. But amid the backtracking there are still some stocks to buy.
The S&P 500 has given back 3.3% since peaking last week. The tech-heavy Nasdaq Composite has one-upped that transgression with a loss of 8% at its worst. And individual stocks, especially tech companies like Amazon (NASDAQ:AMZN) or Zoom Video (NASDAQ:ZM) that helped us navigate the novel coronavirus pandemic with just a tiny bit less suffering, have felt significantly larger pains in recent days.
With all of that in mind, here are the names that stand out as key downtrodden stocks to buy today:
As mentioned, it could always get even more nasty for some of this week’s Wall Street sob stories. And knowing the market has a sick sense of humor and enjoys repeating itself, a more meaningful bottom may still be a full month out. Taking 2020 as an example, that event happened on March 23. Still, if you’re willing to bear some risk that doesn’t mean these three names aren’t opportunities worth considering now. Here’s a closer look at each.
Downtrodden Stocks to Buy: Plug Power (PLUG)
Source: Charts by TradingView
Over the course of 2020, PLUG become the de facto choice of investors looking for a piece of the hydrogen economy. And Plug Power shares surged higher by a dazzling 1,100% on the back of executing strongly on its long-term sales goals.
Aside from a more green-friendly administration in the White House, Plug continues to fire on all cylinders in 2021 with burly deals tied to Renault (OTCMKTS:RNSDF) and South Korean industrial giant SK Group. It has also solidified deals with A-list customers like Amazon and Walmart (NYSE:WMT).
PLUG’s next challenge is set to arrive tonight with earnings on tap. Quarterly announcements can be dicey events to sit through. But with shares falling back to earth, or rather, finding pattern support off a key uptrend line after a bubble-bursting 51% decline, I’m with InvestorPlace’s Luke Lango in recognizing it’s time to get greedy with this crashed stock to buy.
Favored Strategy: March $45/$60 Collar.
Canopy Growth (CGC)
Source: Charts by TradingView
All stocks correct. Oftentimes those declines can lead to corrections of 30% for a stock of Canopy Growth’s caliber. And that’s during the best of times within a healthier bullish market. We’re still in one, but the environment, as stressed, has turned against many recent leaders. That includes CGC stock, the market’s largest publicly traded cannabis play.
Technically, shares have corrected by a hard-hitting 44%. But the outsized loss should prove temporary. CGC stock is now in the process of putting together a volatile but bullish hammer candlestick. The pattern has also successfully challenged its 50% Fibonacci level dating back to the March Covid-19 bottom, as well as uptrend support built over the past five months.
Is CGC stock perfect? Nothing ever is. But with a well-placed and limited risk spread, investors can mostly chill and certainly rest easier with this downtrodden stock to buy.
Favored Strategy: April $32.5/$45 Collar.
ARK Innovation ETF (ARKK)
Source: Charts by TradingView
Over the course of 2020 the Ark Innovation Exchange-Traded Fund came on the radar of many investors seeking to do better than the market. And shareholders did just that in a noticeably big way. Compared to the S&P 500’s gain of 16% or the Nasdaq Composite’s burly 43% return, ARKK soared by 150%.
So, what gives? The massive outperformance rests on the fund’s aggressive actively managed, growth centric and concentrated positioning. ARK Innovation’s current top three holdings in a portfolio of just 56 stocks are Tesla (NASDAQ:TSLA), Roku (NASDAQ:ROKU) and Square (NYSE:SQ). The trio accounts for a combined weighting of 20% of ARKK. Enough said? Not quite.
Led by the outspoken and savvy Cathie Wood, this crashed stock to buy has corrected 20.59% in less than two weeks. Does being an investor in the S&P 500 sound a bit more attractive? Sure it does, but you can’t have it both ways. And the significantly larger decline is par for the course given ARKK’s structure during risk-off environments.
Technically, some may tremble at the size of ARKK’s loss and worry a bear market has only just begun. Shares have in fact just breached the classic 20% line in the sand associated with bear markets. Still, I’m optimistic about that other line on the price chart. Shares have pulled back towards a test of this past year’s uptrend line.
Stochastics on ARKK’s weekly view aren’t ideal for entering a long in this crashed stock to buy. But the indicator is well inside neutral territory. That’s a positive. Also consider that its condition could quickly change for the better over the next week.
Could Mr. Market have plans for history to repeat like clockwork, i.e., a larger bear market bottom that aligns itself with 2020’s Covid-19 anniversary low? Maybe. But with the help of ARKK’s options market, investors don’t have to try and pick a low to gain an upper hand.
Favored Strategy: April $155 Call / ($125/$100 Put) Modified Collar.
On the date of publication, Chris Tyler holds, directly or indirectly, positions in Plug Power (PLUG) and ARK Invest Funds, but no other securities mentioned in this article.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
